Applied Optoelectronics (AAOI) stock plummeted 7.72% during Friday's intraday trading session, reflecting significant downward pressure on the optical communications company.

The decline was primarily driven by persistent bearish sentiment surrounding Co-Packaged Optics (CPO) technology commercialization timelines. Industry research indicates that large-scale CPO adoption may be delayed until 2028 or even 2029, with system-level yield potentially as low as approximately 19.4%, which is far below market expectations for rapid near-term volume ramp-up. While NVIDIA has stated its CPO switches will begin mass production as planned in the second half, Morgan Stanley's assessment largely aligns with bearish views that CPO volumes may fall short of expectations, intensifying bull-bear divergence across the sector.

Applied Optoelectronics, as a high-beta name with significant prior gains and among the few U.S.-based AI optical module manufacturers with proprietary InP laser production capabilities, is particularly sensitive to reassessments of advanced technology commercialization timelines, sustaining pressure on the stock.